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Petticoat Lane: How not to run a street market

East End pitches: Lib Dems lambasted for rigging policy to favour their own interests in famous trading area

The conduct of councillors and town-hall officials responsible for running the world-famous street markets of Petticoat Lane and Brick Lane in the East End of London was yesterday criticised as "disturbing" and "cavalier" in a forceful report by the District Auditor.

Kash Pandya described a "catalogue of unacceptable conduct" which led to a disregard for rules and procedures in the London borough of Tower Hamlets.

It was "an object lesson for members on how not to exercise their roles", said Mr Pandya in his 80-page report into the running of the markets.

Over three years Mr Pandya investigated how the then Liberal Democrat- run council had managed to turn a pounds 300,000 surplus on its market business in 1989 into a deficit of pounds 1.5m by March 1994.

Although highly critical of how the borough ran its market business, how it lost income from licensed pitches and how it did nothing about "illegal" sub-letting of pitches, Mr Pandya reserved his strongest criticism for how councillors directly involved in street trading manipulated council policy in their own financial interest.

Considering the lucrative business of sub-letting some of the council's 7,000 pitches - mainly located in the Bethnal Green area - Mr Pandya states this "unlawful" trade exists and can only exist "with the knowledge of some council officers".

The auditor looked at the business activities of three named councillors. Betty Wright, elected as a Liberal Democrat councillor in May 1990, was an unlicensed trader working from a sub-let pitch. After her election she was ordered to stop but continued.

At the time of her election the council was revoking the licence. Mr Pandya's report refers to "documentary evidence" which showed certain councillors applying pressure on council officers not to proceed with revocation which would have pushed Mrs Wright out of business. The report states: "The role played by some members, in particular Councillors Wright, John Snooks and Jeremy Shaw during this period gives me cause for considerable concern."

Although Mrs Wright claims never to have traded from the pitch, Mr Pandya says the roles played by Mr Snooks (then chairman of the borough's street trading panel) and that of Mr Shaw were "disturbing".

However, Mr Pandya says the evidence falls short of showing "wilful misconduct" and persuaded him not to take the matter to the criminal courts and seek the recovery of lost revenue by surcharging the councillors.

In an investigation in 1992 by John Hendy QC of the Crown Prosecution Service also concluded that there was "insufficient evidence"to proceed.

Mr Pandya's investigation into the pounds 1m deficit on the street trading account found that charges which the council listed for such services as refuse collection were irregular and "outwith the council's statutory powers".

Answering the report's criticisms that Tower Hamlets had operated "totally ineffective budgetary control procedures", a council source yesterday said that while the report had been critical of individuals there had also been criticism of "accounting methods" which put money from street trading into the council's account - helping to reduce the borough's rates.

Yesterday, Tower Hamlets accepted that the handling of street markets during 1989-92 was "inadequate". It will discuss the report "as a matter of urgency" in the near future.